Where in the U.S. is New Home and Lot Demand Peaking?
There’s a new verdict on housing every week—one week the recovery is alive and well, and the next week we’re doomed. For the most part, the media reports on national housing trends, with an occasional sensationalistic slant on the best and worst markets based on historical home closings. Rather than focusing on what’s already occurred, what if we instead focused our attention on better understanding the correlation between consumer demand for new homes, and builder demand for finished lots
Builder set out to do just that by surveying Metrostudy’s Regional Directors in markets across the country. Metrostudy provides primary research and analysis on residential real estate development and new-home construction, with a wide net of market coverage across the United States. Using a scale of 1-10 (1 low, 10 high), regional directors scored both demand metrics for their market areas.
Looking at Demand Nationally
A broad examination of demand scores and commentary gathered from the regional directors reveals that rising prices are the primary culprit throttling the new home market, for builders and buyers.
The average score for new home demand across Metrostudy’s markets is a 6, while demand for finished lots remains (unsurprisingly) high with an average score of 8.
Builders and buyers are experiencing the same problem—affordability. Very few market areas remain unscathed by rising lot prices due to low supply, perpetuating higher price tags for buyers, which then impacts demand.
A recent reportconcedes the so-close-but-yet-so-far reality of home buyer purchasing reflected in Metrostudy’s new home demand scores: 41% of respondents said they prefer to buy a new home over resale, but of those buyers interested in new homes, only 46% were willing to pay the 20% premium that new homes typically require, and only 17% of respondents said they would pay at least 20% more for a new home.
High Demand Markets
The Bay Area, Austin, San Antonio, South Florida, Houston, and Las Vegas received the highest scores for both new home and new lot demand. Up to now, these markets have been in the fortunate position of having enough lots on the ground to deliver homes and get buyers across the finish line—higher price tags and rising interest rates have yet to quash demand. For that reason, these markets are some of the strongest in the country, but they’re also becoming bottlenecked, as demand for homes is now surpassing land supply, even in “B” locations.
These markets have thriving economies and employment growth backing demand for new homes, but the looming question is whether prospective buyers will search for other options to meet their housing needs, once builders in these markets can no longer secure lots they need, and price tags for new homes become out of reach for many prospective buyers.
Greg Gross, Regional Director of Northern Calif., and Nevada markets, already anticipates the latter in the Bay Area market. “Prices have increased so rapidly, and buyers are being squeezed. Demand may be high, but more and more buyers will not be able to purchase.”
How High is Demand in Your Market?
Housing trends can be difficult to monitor on a national scale. We all know that housing is a local business and each market is nuanced in ways that only locals can fully understand. Builder‘s interactive map below will call out new home and lot demand scores logged by regional directors as you hover over each market’s location, and also gives you a flavor of each market’s differences. Click on a market’s marker to see additional commentary on scores, a map of the area’s coverage, and contact information for the regional director that provided the score.